2U, Inc. Beats Expectations in a Busy Quarter for New DGPs
2U Inc. (NASDAQ: TWOU) announced better-than-expected second-quarter 2018 results late Thursday, detailing a particularly busy quarter for new domestic graduate-program announcements. 2U also increased its full-year financial guidance.
Still, shares of the online education platform company fell almost 6% on Friday. So let's have a seat to learn what 2U accomplished over the past few months, and whether the pullback is merited.
2U results: The raw numbers
Metric | Q2 2018 | Q2 2017 | Year-Over-Year Growth |
|---|---|---|---|
Revenue | $97.4 million | $65.0 million | 49.8% |
GAAP net income (loss) | ($18.3 million) | ($11.8 million) | N/A |
GAAP earnings (loss) per share | ($0.33) | ($0.25) | N/A |
DATA SOURCE: 2U, INC. GAAP = generally accepted accounting principles.
What happened with 2U this quarter?
On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition costs, 2U's net loss was $10.3 million, or $0.19 per share, widened from a loss of $5.2 million, or $0.11 per share in the same year-ago period.
Adjusted EBITDA arrived at a loss of $5.6 million, compared to a $1.5 million adjusted EBITDA loss in last year's second quarter.
Each of these figures compared favorably to 2U's respective guidance ranges provided in May. It called for revenue of $95.1 million to $96.1 million, a GAAP net loss per share of $0.42 to $0.41, an adjusted net loss per share of $0.22 to $0.21, and an adjusted EBITDA loss of $6.2 million to $5.7 million.
Recently announced domestic graduate programs (DGPs) include:
Two DGPs with Tufts University, including an online Master of Global Business Administration and a suite of online graduate-level degrees.
An accredited hybrid Juris Doctor degree with the University of Dayton School of Law.
A new MBA program within the previously announced DGP with Pepperdine University.
An online Master of Legal Studies degree with American University Washington College of Law.
An online Master of Science in Communication Sciences and Disorders degree with Baylor.
A 12-year extension of 2U's partnership with Washington University's St. Louis School of Law, including a new LL.M. in Taxation degree.
An online Master of Science in Data Science program through the University of Denver.
Two DGPs with Fordham University, including a Master of Studies in Law in Compliance, and a suite of specialized management and finance degrees.
IMAGE SOURCE: GETTY IMAGES.
What management had to say
2U co-founder and CEO Chip Paucek stated:
In the three months since our last earnings report, we've announced a total of eight new graduate programs, putting us on pace to complete our 2019 launch cohort this quarter, the earliest in 2U's history. Ten years in, we have a proven and unparalleled track record of delivering for our partners and their students, which continues to drive exceptional momentum in both degree and short course pipeline as well as long-term contract extensions by existing clients.
Looking forward
For the third quarter of 2018, 2U is targeting revenue of $106 million to $107 million, adjusted EBITDA of $4.2 million to $4.8 million, a GAAP net loss per share of $0.20 to $0.19, and an adjusted net loss per share of $0.03 to $0.02. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates predicted a net loss of $0.03 per share on revenue slightly below the bottom end of 2U's outlook.
Finally, 2U once again raised its full-year 2018 outlook to call for revenue of $409.7 million to $412.2 million (up from $406.6 million to $410.6 million before), and an adjusted net loss per share of $0.10 to $0.08 (up from previous guidance for a loss per share of $0.13 to $0.10).
In the end, there was nothing not to like about 2U's latest beat-and-raise performance, so it seems strange to see the stock down nearly 6% on Friday in response. That said, investors should keep in mind that 2U stock had climbed more than 60% in the year leading up to this report, likely leaving traders tempted to take some profits off the table despite its positive momentum.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends 2U. The Motley Fool has a disclosure policy.
